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TWIN DISC, INC., ANNOUNCES FINANCIAL RESULTS FOR FISCAL 2004 SECOND QUARTER
AND FIRST HALF
RACINE, WISCONSIN-January 16, 2004-Twin Disc, Inc. (NYSE: TDI), today announced
financial results for the fiscal 2004 second quarter and the first six months
ended December 31, 2003. Although sales for the second quarter were down
modestly compared with the same period last year, net earnings improved year-
over-year for the fourth consecutive quarter. The first-half financial results
for fiscal 2004 continue to exhibit an improving trend in both sales and
earnings growth compared with the same period last year.
For the fiscal second-quarter of 2004, net sales were off less than 1% to
$42,371,000 from $42,794,000 for the same period one year ago. Net sales were
positively impacted by net favorable currency exchange rates, primarily the
stronger Euro and Australian dollar in relation to the U.S. Dollar, of
approximately $3.3 million when compared to the same quarter last year.
Effective in the fiscal first quarter, the Company's joint venture agreement
governing its subsidiary in Japan was amended. The effect of this change had
no impact on net earnings. However, the prior year's fiscal second quarter
included $3.2 million in sales for certain territories that are no longer
recognized by the joint venture.
The Company reported net income of $508,000 or $0.18 per diluted share, compared
with last year's net loss of $3,087,000, or $1.10 per diluted share. Earnings
in the 2004 second-quarter improved because of a significantly higher gross
margin due to the implementation of cost reduction programs, a restructuring
program undertaken last year, a better product mix, and the absence of
manufacturing inefficiencies. Also, last year's second-quarter operating
profitability was largely impacted by after-tax charges to continuing operations
of approximately $1,700,000 primarily for workforce reductions.
For the 2004 fiscal first half, sales were up modestly to $80,337,000 compared
with last year's $79,315,000. Included in the first half of the current fiscal
year are net favorable currency exchange rate benefits of approximately $5.0
million when compared to the first half of last year. The prior year's fiscal
first half included $5.6 million in sales at our Japanese distribution
subsidiary that are no longer recognized in accordance with the amended
agreement discussed previously. This change had no impact on net earnings. Net
income for the 2004 first-six months was $679,000 or $0.24 per diluted share
compared with last year's net loss of $1.72 per share.
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The Company also announced today the sale of its 25% minority interest in
Palmer Johnson Distributors, LLC (PJD) to the majority holder, PJD, Inc. for
$3,900,000 cash, which approximated the net book value of the investment. The
results of this transaction will be reflected in the Company's third quarter
financial results. For the six months ended December 31, 2003 and the fiscal
year ended June 30, 2003, the Company recognized pre-tax earnings of $240,000
and $414,000, respectively, from its investment in PJD. In addition, the
Company received cash distributions of $195,000 and $303,000 for the first half
of fiscal year 2004 and all of fiscal year 2003, respectively.
Chairman and Chief Executive Officer Michael E. Batten said, "The past three
months were a very busy period and we were pleased with both the financial and
operational progress that occurred in the second quarter. Year-to-date, our
trailing 12 months earnings per diluted share are now $1.12.
"Our people responded well in scheduling production to meet customers' delivery
dates, as we had fewer work days available in November and December for
shipments. With a higher level of sales and manufacturing activities planned
over the next six months, we are working conscientiously in preparing production
and shipment schedules through the remainder of the fiscal year.
"Our backlog of orders to be shipped over the next six months is $47,500,000.
This is an increase of nearly 16% from the prior quarter and is up over 55%
since the start of the fiscal year. We are encouraged by this growth and are
working closely with our vendors to insure timely deliveries of supplies so that
we can meet all scheduled shipment dates."
Commenting on the PJD sale, Mr. Batten said, "Under a 10-year operating
agreement entered into in connection with our investment in PJD, which would
have expired in May 2004, we have mutually agreed to the sale of our minority
interest. The cash received from this sale will allow Twin Disc to continue its
efforts to strengthen its balance sheet and will provide additional flexibility
as we evaluate future strategic initiatives."
Mr. Batten further added, "Palmer Johnson has been one of the largest and most
important distributors of Twin Disc products for more than 25 years now. We are
looking forward to maintaining our close working relationship with the Palmer
Johnson team in the years to come."
Twin Disc, Inc., designs, manufactures and internationally distributes heavy-
duty off-highway power transmission equipment for the construction, industrial,
government, marine, agricultural, and energy and natural resources markets.
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This press release may contain statements that are forward looking as defined by
the Securities and Exchange Commission in its rules, regulations and releases.
The Company intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on current
expectations regarding important risk factors including those identified in the
Company's most recent periodic report and other filings with the Securities and
Exchange Commission. Accordingly, actual results may differ materially from
those expressed in the forward-looking statements, and the making of such
statements should not be regarded as a representation by the Company or any
other person that the results expressed therein will be achieved.
-Financial Results Follow-
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share data; unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Net sales $42,371 $42,794 $80,337 $79,315
Cost of goods sold 31,650 36,114 60,720 66,705
------ ------ ------ ------
Gross profit 10,721 6,680 19,617 12,610
Marketing, engineering and
administrative expenses 9,277 8,971 17,635 17,290
Restructuring of operations 0 2,042 0 2,042
------ ------ ------ ------
Operating income 1,444 (4,333) 1,982 (6,722)
Interest expense 283 325 563 633
Other expense (income), net 21 (64) (184) (105)
------ ------ ------ ------
Earnings (loss) before income
taxes and minority interest 1,140 (4,594) 1,603 (7,250)
Income taxes 624 (1,536) 905 (2,431)
------ ------ ------ ------
Earnings (loss) before minority
interest 516 (3,058) 698 (4,819)
Minority interest 8 29 19 (1)
------ ------ ------ ------
Net earnings (loss) $ 508 $(3,087) $ 679 $(4,818)
------ ------ ------ ------
------ ------ ------ ------
Earnings (loss) per share:
Basic $ 0.18 $ (1.10) $ 0.24 $ (1.72)
Diluted $ 0.18 $ (1.10) $ 0.24 $ (1.72)
Average shares outstanding:
Basic 2,813 2,808 2,808 2,808
Diluted 2,833 2,808 2,823 2,808
Dividends per share $ 0.175 $ 0.175 $ 0.35 $ 0.35
Contact: Twin Disc, Inc.
Christopher J. Eperjesy (262) 638-4343